This is the Difference Between Pre-qualification and Pre-approval

You may have been pre-qualified for a loan, leaving you pretty excited and anxious to get shopping. However, sellers and selling agents might be less enthused than you might have expected. This indicates that you should gain more understanding into the difference between pre-qualification and pre-approval of a loan.

Pre-Qualification

With pre-qualification, you're simply experiencing a casual financial evaluation. You're likely holding a document that states how much you're worth based on some preliminary stats. This is always a good idea, but it doesn't make you a cash buyer. The good news is that some homeowners won't even enter into a contract with buyers unless they are pre-qualified. This simple act, while not approval or an actual guarantee of a loan, does let you know that a bank is likely willing to give you a loan when you need one. This is also good to look into if you aren't sure rather or not you are qualified financially to get a house.

Pre-Approval

A pre-approval letter, however, is the next step and it does indicate that you are ready to buy. You've likely paid a fee up front to get approved, and you're holding onto a document that is good for a specific amount of time, usually 30-90 days. This process is much more complicated, as you will need to fill out the actual application, show proof of income and outstanding bills, and pay a fee. However, this is obviously more appealing to a seller because the lender has given their first seal of approval on the mortgage loan. However, it's important to remember that if you don't use it, you lose it.

Always research all of your options before you apply for a loan. You don't want to be stuck with something unsatisfying when there might have been a better opportunity right around the corner.